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Thousands of small and medium businesses in the UK are finding it increasingly hard to keep the lights on as energy prices continue to rise.
Earlier this week, official data showed UK inflation had reached a four-decade high of over 10 percent. This has affected consumer spending, which these businesses depend on for survival.
It is going to get worse, too. The Bank of England forecasted that consumer price inflation will reach 13.3 percent in October, CNBC reported today. The report cited a new survey showing consumer confidence had fallen to the lowest on record.
“While the energy price caps do not apply to businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are rising in most operational areas,” a UK insurance executive told CNBC.
“Simultaneously, consumer purchasing power is going down as Brits cut back on non-essential spending, harming the books of SME [small and medium-sized enterprise] owners.”
The energy cap that the executive referred to is a ceiling on energy prices that gets revised twice a year to reflect wholesale energy prices. The latest revisions have been bad news for Britons, promising to raise their average annual electricity bill by the pound equivalent of more than $5,000 in the first quarter of 2023.
City A.M. reported earlier this month that at least half of the current inflation rate in the UK is the direct result of soaring energy prices, which have fuelled a cost-of-living crisis that the government is struggling to contain.
In July, a survey showed that as much as 82 percent of British businesses saw inflation as a growing concern. Now, the number is probably even higher as energy inflation remains excessively high, driving all other prices higher, too.
“Businesses face an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes, and labor,” said the head of research for the British Chambers of Commerce that conducted the survey in July.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.